How much will we pay?
A couple of days ago, Steve Odem, EA sent me a link to the Tax Foundation's Tax Burden website.
They have a nifty tool that let's you play with different scenarios to see what will happen to your tax burden, or that of your clients, if the Bush tax cuts expire, if they are extended, and if Obama's plan takes effect.
You can toss in any set of numbers and see what will happen.
So I tested a typical, urban couple, where both work, with minimal investments, a home and a bit of charity.
They have two children under age 17, with child care and one older child in college.
Under the Bush Tax Cuts, they would pay $9413.
If the cuts expire, they would pay $13290 ($3877 more)
Under Obama's planm they would pay $8613 ($800 less than the Bush package)
What happens if this couple is 'rich' and I increase the wages to $251,000?
There is no difference between the Bush and Obama packages - both show total liabilities of $52577.
But if the Bush package is not extended, their burden would be $56877 or $4300 extra - an extra 1.71% of AGI.
The reason there is no difference between the extended Bush and Obama packages?
Alt Min kicks in. Otherwise the Obama package would yield a savings of $315.
The Tax Foundation says: Note: The President's Budget includes an "AMT patch" for 2011, exempting more taxable income from the alternative minimum tax (AMT). This calculator assumes an AMT patch for all three scenarios.
I am not seeing any benefit from an AMT patch here. Are you?
Also, it's not clear if this Obama package include Treasury Secretary Timothy Geithner's proposal to extend the Bush tax cuts for everyone except those earning over $250,000.
How did your experiment turn out?
Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.